Odyssey Financial Technologies, the provider of Wealth Management solutions, today announced the acquisition of CAfIT, a leading provider of Fixed Income, Derivative and Equity front office solutions. Now I have long been a champion of the CAfIT product suite (FIPA for modelling and asset allocation, APRE for performance attribution, REMIA that allows FMs to make active bets for risk-adjusted returns and the Analytics Engine, recently bought by Schroders) and must send my hearty congratulations to Raquel Elias and Gem Tugwell who have worked so hard over the years to produce such great software. I wish you all the best with the integration with Odyssey and hope it works out. Conceptually it looks like a good move to me as Odyssey have no competing solutions in the asset management sphere and the two firms should be able to leverage off each others' client bases. Given the increasing demand by HNWI for structured solutions, and thus the increasing complexity of Wealth Management operations, you can therefore see the sense in this. If you are a buy-sider looking for a specialist Front Office Solution then I recommend you go talk to the guys at CAfIT as they are one of the few software houses that actually understand the investment process and have produced solutions to fit investment managers and hedge funds. Their web site is at CAfIT. Alternatively drop me a line at sean.sprackling@bluerock-consulting.com and I can introduce you.
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Tuesday, May 22
CAfIT bought by Odyssey
by
Sean Sprackling
on Tue 22 May 2007 09:34 BST
Friday, May 18
T Zero buys Settlement Firm
by
Sean Sprackling
on Fri 18 May 2007 09:31 BST
T Zero, the company that offers users "agnostic connectivity" in the OTC market and which is owned by Creditex, the leading elcontronic trading platform for credit derivatives, has announced that is has partnered with a loans settlment provider to provide further processing capabilities. The company in question is called Trade Settlement and is part of a push by Creditex to corner the loan-only CDS trading market that is expected to explode in the coming months. Notably this announcement also coincides with the launch by Creditex of LCDX - which is a dealer backed credit default swap index that will doubtless prove a further philip for the already liquid market.
I can certainly see the logic in the move - DTCC DerivServ did something similar a few months back by partnering with CLS bank to provide settlement services for credit derivatives with a direct link from their Trade Information Warehouse. OTC post trade servicing is frankly a huge pain and the more automated services that can be offered to clients the better I say. However (and this may be the product of ignorance rather than insight) the whole feel of the loan market and the offloading of risk feels like a bubble waiting to burst to me. Years ago it was the central banks that controlled the world of lending with their rate hikes. However in recent times the credit frenzy seems to have gone on unabated despite rate rises. In an article that I read in the FT this morning it stated that in the last week alone $4.5bn of new CDOs hit the market with another $57.7bn in the pipeline. As it said in the article, (and the assets are actually structurally quite similar) imagine the effect of these numbers if we had been talking about Mutual Funds and not collateralised instruments. And all is apparently not rosy in the CDO land anyway, losses are starting to rack up new firms (such as Park Square Capital) emerging with the stated intention of preying on CLO shakeouts. As credit spreads tighten below the 250bp tipping point (they are currently hovering around 225bps) these instruments stop being as attractive as they once were. Buy Side managers however are (somewhat typically) slow off the mark and (bar the adventurous few) are only now waking up to the possibilities of the collaterised market - F&C announced that it was looking for experienced CDO people this week - I just worry that they may be too late to offer any significant value to their clients..... Tuesday, May 15
Thomson and Reuters finally tie the knot
by
Sean Sprackling
on Tue 15 May 2007 17:19 BST
So, my old firm, Thomson Financial, has finally managed to bag Reuters in a colossal £8.8bn tie up. This pitches them firmly in a head-to-head with Bloomberg in the market for the provision of market data and trading terminals to financial institutions. These two behemoths now have an effective duopoly of that market as follows:
- Bloomberg 34% - Thomson/Reuters 34% - S&P 13% - Moody's 10% - Interactive Data 3% Source: EFinancialNews The merger has already got over its first potential hurdle, having had tacit agreement from the Reuters Trust (the group set up to protect the independence and integrity of the company). However there is still the small matter of the UK Competition Commission to convince. Nonetheless this is a stunning move from TF. I worked there many moons ago now (back in the late 90s) and back then Sir Ken (Thomson - the mogul who owned the Thomson Corp) was always hinting that he would eventually like to on Bloomberg head on. It's a real shame that he is longer alive to see this. Huge plaudits should also go to Sharon Rowlands for steering them in this direction with such a steady hand. Personally I am not sure whether she will survive the merger, but she is an impressive and wildly talented individual - so I doubt that this will be the last that we see of her on the corporate scene. Monday, May 14
Thomson Tradeweb launches Convertible Bond trading
by
Sean Sprackling
on Mon 14 May 2007 14:38 BST
Thomson Financial today announced that Tradeweb, its on-line trading platform that already offers many flavours of fixed income products including credit default swap indices and interest rate swaps, was to begin trading in convertible bonds. The launch seems to have been timed carefully as Tradeweb faces increasing competition from the investment banks in the form of LiquidityHub (see earlier article). LiquidityHub have noticeably signed distribution deals with Reuters and Bloomberg - and thus were effectively trying to squeeze Thomsons out of the market. The mooted merger of TF and Reuters could of course scupper this anyway, but Tradeweb certainly seems to be positioning itself as an invaluable asset in the buy side world should that merger actually happen.
However, company jostling aside, I do think that this will be a boon for many a buy side manager. I have always found convertible bonds to be strange beasts, and pricing the things has always been tricky. Most managers that I know who have them in their portfolios tend to spend half their life ringing around dealers to get a composite price. Convertibles behave peculiarly. For example, when the price of the underlying stock is far from the conversion price, a convertible trades much like a bond. These "busted convertibles" gain value when interest rates fall; they fall in price when interest rates rise. But when the underlying stock approaches the conversion price, however, a convertible bond begins to trade in lockstep with the stock. A good way of showing this can be seen in the diagram below:
Friday, May 11
Booming Equity Derivatives Markets
by
Sean Sprackling
on Fri 11 May 2007 14:49 BST
The exchange-traded equity derivatives market volumes have surged to record highs in the first
four months of the year in Europe as hedge funds and algorithmic traders
increasingly seek new avenues for alpha generation with increasingly complex trading strategies that involve their use. Equity derivatives contracts are also now being used more by traditional
funds, such as pension and life companies, as they take advantage of European
regulations such as UCITSIII that give them more freedom to invest.
The Financial Times today reported that Equity derivative volumes rose by 22%, with 127m contracts traded in the first four months of the year on Euronext Liffe, the international derivatives exchange. This follows record figures published last week by Eurex, the other leading European equity derivatives exchange, which saw volumes rise by 52%, with 365m contracts traded in the first four months of the year. Although the figures do not take into account over-the-counter trading, which attracts the lion's share of business, they point to the growing trend in their use. |
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